Depreciating Assets

Depreciation is a way of allocating the cost of an asset over its useful life for tax and record-keeping purposes. Over time, the value of an asset decreases due to wear and tear. You depreciate assets to record this loss of value on a periodic basis. You can depreciate an asset at any time after capitalization and prior to full disposal or the removal of capitalization. Only vintage and group account assets can accumulate depreciation after they have been disposed.

LN uses a frequency to determine whether an asset is eligible for depreciation and how often depreciation should be calculated, and it uses a depreciation method assigned to each book to determine how depreciation should be calculated. For more information on methods, see the Using Depreciation Methods topic.

To depreciate the ADR book for assets that are in a vintage or MACRS group account, you must use the Depreciate Vintage/Group Account (tffam7272m000) session. For more information, see the Depreciating Vintage/Group Accounts topic.

You cannot depreciate beyond the end of the current fiscal year without first closing the last period through the Fixed Asset Period End (tffam8205m000) session. You can restate depreciation for prior periods. For more information on restating depreciation, see the Restating Depreciation for Assets topic.

Depreciation runs by a through date equal to a particular period and year. You indicate a through date to tell LN how far depreciation should be run. If you specify a date prior to the last depreciation date, nothing happens. When computing depreciation, LN calculates and compares the new value to the existing value. The difference is recorded as the depreciation transaction for that period.

After determining in which books the selected assets are eligible for depreciation, LN performs these actions on each asset and book that qualifies:

• Changes the status of the book from Acquired to Depreciating in the Asset Books (tffam1510m000) session, if depreciation has not previously been calculated for that relationship.
• Calculates and records the depreciation amount for the periods you indicate.
• Adds the calculated depreciation amount to the accumulated and year-to-date depreciation.
• Changes the last depreciation date to the date through which LN calculated depreciation.
• Changes the remaining life to indicate how much of the life remains to be depreciated.
• LN creates a journal entry, when appropriate.

An asset depreciates based on the life recorded in its related books. Most assets measure life in years and months, but some assets track their life in units of production. Before you can depreciate any asset with a life measured in units of production in its related books, you must indicate the units used since the last time LN calculated depreciation for the asset and its related books. You record units used in the Record Asset Units Used (tffam1245m000) session. For more information, see the Calculating Asset Units Used topic.

Suspending depreciation

You can suspend depreciation in two ways:

• To globally suspend depreciation for a depreciation method for all asset books, you can use the Suspended Periods (tffam7120m000) session. If you use this method, periods for which you suspend the depreciation are included in the remaining asset life. For details, refer to Suspended Periods (tffam7120m000)
• You can use the Mass Suspend Depreciation (tffam1207m000) session to suspend the depreciation of a range of asset books for a range of years and periods. For details, refer to Suspending depreciation

Accelerated depreciation

Accelerated depreciation is to depreciate an asset by an extra amount in a specific year. In some countries, accelerated depreciation is allowed to a maximum of 100 percent of the yearly standard depreciation amount, until the asset value becomes zero. Accelerated depreciation reduces the depreciation time. Accelerated depreciation transactions must be posted to specific ledger accounts.

Accelerated depreciation follows the same rules as the standard depreciation. If the standard depreciation is suspended, the accelerated depreciation is also suspended. If the actual use of the asset changes, you can reduce or suspend the accelerated depreciation accordingly.

You can use the Mass Accelerated Depreciation (tffam1208m000) session to depreciate a range of asset books by an additional amount. You can do this only once a year.